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Friends in low places

The world’s top two commodity traders Vitol and Glencore used middlemen notorious for their role in Brazil’s mammoth ‘Car Wash’ bribery scandal, our investigation with Switzerland’s Public Eye reveals.

The world’s top two commodity traders used middlemen notorious for their role in Brazil’s mammoth ‘Car Wash’ bribery scandal, our investigation with Public Eye reveals.

Previously unreported court material also places Trafigura, the world’s No. 3 trader, in negotiations with a Car Wash player now so infamous he is known as the “Deacon of Bribes”.

Shamed politician Delcidio do Amaral was one of the first to allege an oil price-fixing scam at Petrobras. Credit: Getty Images/Andressa Anholete

Corporate behemoths Glencore, Vitol and Trafigura have a combined turnover of more than half a trillion dollars - greater than the GDP of Austria - and exercise enormous power over the world’s raw materials trade. Whether it is the grain in your bread, the fuel in your car or the copper wiring in your electric toaster, there is a fair chance it was handled by these commodity traders. But all three have courted
controversy over corruption allegations, links to unsavoury regimes and
environmental abuses. Past exposés by Global Witness and Public Eye have
highlighted commodity traders’ use of corrupt intermediaries in major mining
and oil deals.

Our investigation raises new
questions over the probity of the top three commodity traders, in connection with their choice of intermediaries. The
middlemen’s allegedly criminal role in Car Wash emerged after their dealings with the commodity traders detailed in this report.

To piece together
the exposé, Global Witness trawled through hundreds of Car Wash court documents
to reveal previously unreported facts and spoke with sources across Brazil.

Key findings

Vitol’s
agent for Brazilian oil deals was a key player in a network shown in court
documents to have drawn up multiple bribery schemes, with the collaboration of insiders
at state oil firm Petrobras. Vitol paid him through an
offshore company that had been at the centre of this network’s plans.

Glencore
struck a deal with another middleman who had been part of this same network.
Glencore made an agreement with the middleman over the purchase of a cargo of
fuel oil from Petrobras, the commodity trader admitted.

A
Glencore subsidiary paid at least $2.1m to a father-and-son team of alleged
bribe fixers. Glencore says it engaged the pair as legitimate brokers and
denies impropriety. But a financial report prepared for a top Petrobras
director lists thousands of dollars due as a bribery payment from a “Trading
Glencore” deal, allegedly paid by the fixers.

Trafigura
is the subject of a current police investigation in Brazil, Petrobras told
Global Witness. Trafigura and Brazil’s Federal Police declined to comment.

Two of
the most central figures in the Car Wash scandal – including Brazil’s “Deacon
of Bribes” – exchanged messages on how to dole out bribe payments from a
proposed $2 billion Trafigura oil deal, court
documents show. Trafigura admits proposing the abortive oil deal to Petrobras,
but said it had not "retained" the
Deacon, now serving a 13-year bribery sentence.

In correspondence
with Global Witness, Glencore and Vitol acknowledged doing business with the
middlemen featured in our report. They denied any wrongdoing, or knowledge at
the time that the middlemen were engaged in unlawful activities. But hiring
professional bribe-givers and money-launderers is a major corruption red flag.

An investigation into Glencore and Trafigura's possible role in Car Wash was launched as far back as 2016. Prosecutors say it may yet bear fruit

Trafigura was the
only one of the three companies that would not provide a clear answer on
whether it dealt with any of the middlemen. Trafigura says on its website that
“transparency is
indispensable in our corporate responsibility journey”. It
has declared its support for the Extractive Industries Transparency Initiative,
the benchmark oil and mining anti-corruption body. This year Trafigura
appointed the long-time head of the EITI as its chief
spokesman.

Global Witness is
calling on the UK and its overseas territories, the US and Switzerland to
launch investigations into the commodity traders in Brazil, to determine
whether bribes were paid to secure oil deals. These jurisdictions are home to
their major trading operations, company headquarters, bank accounts and company
registrations (see here for the links). Brazil’s police and the Car
Wash task force – a team within the Public Prosecutor’s Office - are already
investigating the intermediaries and their deals.

The ‘Deacon of Bribes’ Jorge Luz and his son Bruno. Their
tentacles were in almost every corrupt deal studied by Global Witness

Those deals all came
to light as part of the devastating Car Wash scandal, which subsumed the
country’s economy, politicians and the state oil company Petrobras errupting in 2014. Former president Luiz Inacio Lula da Silva has been jailed
over the scandal and outgoing President Temer investigated; in all, some 20
political parties have been implicated and several of the country’s leading
businessmen have been put under lock and key.

On 28th October
Brazilians elected former paratrooper Jair Bolsonaro as their new president, a
man who has repeatedly praised the country’s 1964-85 military dictatorship.
Despite over a decade in Congress as a member of
Brazil’s Progressive Party (which was heavily implicated in
the Car Wash scandal), Bolsonaro stood for president on an anti-establishment
ticket.

While promising to
end corruption, Bolsonaro could undermine the checks and balances that restrain
abuse within Brazil’s political system. He recently said that if elected he
would “put an end to
activism in Brazil”, and his political rivals – including
those in Lula’s Workers’ Party - will have to “go overseas, or
to jail”.

Car Wash – Brazil’s mega-scandal

So what was Car Wash?
In 2014, Brazilian police investigating money laundering at a bureau-de-change
attached to a petrol station uncovered a bribery racket at Petrobras. Some 28 major corporations were found to have paid
kickbacks to Petrobras directors in return for infrastructure contracts. At
least £1.4 billion was filched from the state company.

When police raided the home of politician Candido Vaccarezza they found R$122,000 in cash

Much of the money provided back-door funds to a host of Brazilian political parties, keeping otherwise unstable governing coalitions together. Anonymously-owned companies in tax havens and foreign bank accounts helped launder the loot. One Petrobras director alone channeled €20m to banks in Monaco from accounts in the Bahamas, Panama and elsewhere. Such was the upheaval, with billions slashed in investment, that it helped bring about the worst recession in Brazil since records began, with the economy shrinking nearly 4% in 2015 and 2016.

The focus of Car Wash
investigators has so far been on Petrobras’s construction deals, and its trade in oil has barely featured. Brazil is
the world’s ninth largest oil producer, behind the United Arab Emirates and one
place ahead of Kuwait. It has the second largest crude reserves in South
America, after Venezuela. Brazil is also the world’s ninth largest economy,
with 207 million people and a mushrooming number of gasoline-chugging vehicles
(90 million and counting).

Brazil’s oil trade: an 'illicit framework’

Not only does Brazil produce 2.1m
barrels a day of oil, but it also imports billions of dollars of fuel and
“light” crude, which is needed for its refineries. This makes the country a
bonanza for oil-trading companies, which handle the logistics of import and export. The
figures speak
for themselves. Court documents show that between 2003 to 2015 Vitol did at
least $12.2 billion worth of business in Brazil and Trafigura $8.9 billion.

Global Witness’s interest in these dealings was piqued by some astonishing plea bargain statements by two of the most senior figures in Petrobras:

Global Witness reporters tracked down Nestor Cervero at a remote ranch hidden away in the Atlantic forest of southern Brazil

Nestor
Cervero, a former International Director of Petrobras, sentenced to 32 years
under house arrest for laundering more
than a million dollars in bribes;

and
Delcidio Amaral, a former Gas and Energy Director at Petrobras, who became the
Workers’ Party leader in the Senate—before being humiliatingly voted out of
office after his November 2015 Car Wash-related arrest.

Amaral said in his February 2016
statement that the Supply Department was “one of the most coveted areas of
Petrobras, mainly because of the trade in oil abroad”. He described the daily
trade in hundreds of thousands of barrels of light crude as an “illicit
framework”. “Small variations in the price of oil represent high earnings for
the main operators, giving rise to a terrain for various illicit activities,
since prices may be artificially altered,” he continued. The trade was all done
in London through “brokers”, according to Amaral.

‘Political interference’

Cervero’s plea bargain the previous
month echoed these claims, raised the role of the commodity traders. He said
Petrobras’s illicit business affairs concerned the trade in fuel too.

“This marketing is done mainly through the
trading companies,” he said. “The biggest tradings are Glencore and Trafigura."

"The
volume traded is very large and the cents of daily trades can yield millions of
dollars at the end of the month in bribes.”

“There has always
been some kind of political interference in the trading area,” he said. Cervero
also said the trade in oil and oil products was carried out through the Supply
Department, which had substantial freedom as the board of directors did not
need to sign off such deals.

The Supply
Department director was Paulo Roberto Costa, who became infamous in Brazil
after admitting taking tens of millions of dollars in bribes in a plea bargain
that turned the Car Wash investigation stratospheric. A senior Brazilian
Federal Police source told Global Witness that when they raided Costa’s house,
all the furniture had cavities for stashing cash. He has since been sentenced to 12 years
over bribes for refinery construction deals.

Global Witness
investigators went to extraordinary lengths to speak with Amaral and Cervero
about their testimony. Amaral lives in the central Brazilian city of Campo
Grande, where our investigators spent four days
waiting for an interview that never materialised. The investigators
also tracked Cervero down to a remote ranch in the Atlantic forest of
Itaipava, southern Brazil, where he is under house arrest. Speaking through the
intercom, he declined to answer questions beyond an acknowledgement of his
testimony on Trafigura and Glencore.

In August 2016,
police launched an
inquiry into Petrobras figures named in the plea bargains, along with
Trafigura and Glencore, covering their activities from 2004 to 2012, according
to a leaked police document. The document says police were investigating
possible crimes by various named Petrobras officials and businessmen “as well
as the multinational companies Trafigura and Glencore, which had contracts with
Petrobras”. The public officials “seem to have intermediated and received
bribes paid by the aforementioned multinational companies, possibly starting
before 2004 and possibly up to 2012” in the context of Car Wash.

Glencore said it is "not aware of any investigation into
Glencore relating to Brazil” and has never been contacted about any such
investigation. It added: “The order appears to mention Glencore in the context
of opening an investigation into the three individuals, rather than Glencore.”
Federal Police would not comment on whether the two-year-old investigation was
still running.

Vitol’s payments to Swedish ‘agent’ and a suspected money-launderer

Warlords, dictators and rebels… plus a pillar of the British establishment

With a turnover of
$181 billion, Vitol moves over seven million barrels of oil and petroleum
products daily—enough to supply Germany, France, Italy and the UK. Under the
leadership of Ian Taylor - CEO from 1995 to this year, before becoming Chairman
– Vitol’s value rocketed by 3,500%.

Agent Ljungberg: Vitol's man in Brazil was allegedly a key player in the corrupt Brasil Trade syndicate

Global Witness has
discovered that Vitol and one of its subsidiaries engaged not one but two
middlemen whose involvement in the Car Wash scandal is now detailed in
extensive court evidence.

The first of these was Bo Ljungberg, a Swedish
businessman living in Rio de Janeiro, whose smiling photograph and thumbprint feature in a dossier compiled by Brazilian Car Wash
prosecutors. Ljungberg’s home was raided by Federal Police in August 2017, who
seized laptops, phones and an iPad. Vitol admitted to Global Witness: “Mr
Ljungberg has acted as an agent for Vitol.”

Pressed by Global Witness, it
conceded it had paid Ljungberg in 2011 and 2012 “as a consultant, to support
Vitol in identifying oil business opportunities in Brazil and to assist with
operational aspects of the transactions”. He was paid “through a company of
which he was the 100% owner, Encom Trading SA”. Vitol wouldn’t say how much he
got. The commodity trader said it had conducted “the usual due diligence
processes” on both Ljungberg and Encom saying they had shown up “nothing of any
concern”.

USB stick… and a dynamite email cache

As we shall see, Ljungberg was part
of a group alleged to have conspired in several corrupt schemes, according to
court filings. Emails and documents unearthed by Brazil’s Federal Police
establish Encom’s central role in Car Wash bribery schemes in forensic detail.

And it all began with a USB stick.

In July 2015, police in Rio arrested
a retired admiral for running a huge kickback scheme over a nuclear reactor. Among
the material seized from his house was a USB stick containing a dynamite cache
of documents, including screenshots from a Gmail account with the address [email protected] Eight users had access to
it. No emails were actually sent from the account. Rather, users saved messages
in the drafts folder for others to view—an apparent security measure. This
criminal network was referred to by Brazilian police as the “Brasil Trade”
group.

In August 2018, the
Car Wash task force laid out a host of charges against Brasil Trade members and
associates, ten people in all. They were accused of having “organised
themselves… to practise crimes against the public administration, and to the
detriment of Petrobras, notably corruption” from February 2010 to July 2012.
Ljungberg himself – Vitol’s man in Brazil - was charged with belonging to a
criminal gang, corruption and money-laundering. The case is yet to be tried, and Ljungberg - now living in Sweden - had not filed a defence by the time of publication.

His holiness, and a political fixer

At the heart of
the Brazilian state’s
case against the Brasil Trade syndicate was a corrupt scheme involving
Petrobras’s granting of $180m of contracts for asphalt imports between 2010 and
2014. This asphalt was destined for a major road-building and infrastructure
programme. The seller was giant Florida-based asphalt trader Sargeant Marine.
The task force and police investigators detailed the Sargeant Marine scheme in
court documents, using evidence from the seized USB stick.

The evidence sets
out the corrupt practices of Ljungberg and his co-conspirators at Brasil Trade.
It also illustrates the modus operandi of
Encom, which received a payout from the Sargeant Marine deal and was repeatedly
touted as a partner in Brasil Trade’s schemes.

Another leading
Brasil Trade member was Jorge Luz, known in Brazilian media as the Deacon of Bribes,
and his son Bruno Luz. They were jailed for more than 13 and six years
respectively for orchestrating over $20m in bribes in Petrobras deals over
oil-survey vessels (separate from the Brasil Trade
schemes). A prosecutor on the Car Wash task force told journalists “they
are perhaps the largest operators [of kickbacks] in the international area of
Petrobras” - which is saying something.

The Luzes were key to landing the Sargeant Marine deal. The oxfordgt
emails show the duo using their political and Petrobras contacts to obtain
confidential commercial data that helped remove Sargeant Marine’s competitor
and secure the asphalt contracts. Assisted by one of Brazil’s top politicians –
Workers’ Party parliamentary leader Candido Vaccarezza - and Petrobras Director
of Supply Paulo Roberto Costa, Bruno Luz managed to obtain Petrobras’s
commercially sensitive pricing “formula” for asphalt, according to the
evidence.

Armed with this, Sargeant Marine could offer its
product at just the right price to Petrobras. Meanwhile the Brasil Trade group
factored in a generous cut for themselves, along with bribes for Petrobras
officials and politicians whose palms needed greasing.

In an email of 7th May 2010,
Ljungberg congratulated Bruno Luz on getting the formula. Bruno replied: “This
is certainly the result of our efforts, I mean from all of us. We just need to
be patient as I am sure we are on the right track.” In his testimony to the
police, Ljungberg said he had never even heard of the Brasil Trade group. He
confirmed jointly owning Encom but denied receiving any payment from the
Sargeant Marine deal.

Dirty dancing: Bo Ljungberg issued this inspirational message to his fellow conspirators, straight from the pages of a bad Hollywood script

Ljungberg issued a pep talk a month later, telling his Brasil Trade colleagues they would overcome internal resistance within Petrobras. He ruminated in Hollywood style: “We have the skills to do it. Only we are stepping on toes all the time… The strategy is to dance; to tap dance.” He finished: “We need to beat these guys at their own game.”

Divvying up the loot

When the asphalt contracts were
secured, Jorge and Bruno Luz received commissions in textbook money-laundering
fashion, the funds paid from a Sargeant Marine subsidiary into Swiss accounts
registered by anonymously owned companies in the Marshall Islands, the court
documents show. The Luzes then split the cash, Bruno accounting for the funds
meticulously in spreadsheets using initials and codenames. An August 2010
spreadsheet shows income from the first Sargeant Marine contract being divided
up, with 40% of the funds going to the “Operation” (the Brasil Trade group),
another 40% to “Coordination” (code for Vaccarezza and another lawmaker) and
20% to “Casa” (the House – the Luzes’ code for Petrobras directors, in this
case referring solely to Costa). The deciphering of the code names is based on
police analysis and witness testimony.

A fifth of the Brasil Trade group’s commission
($49,506) then went to “BO and CH” – Bo Ljungberg and fellow suspected
conspirator Carlos Herz. Bank records show they received it in the Swiss BNP
Paribas account of the anonymously-owned British Virgin Islands company Encom
Trading SA, which they were co-owners of. As stated previously, Encom was also
the company Vitol paid Ljungberg’s fees to, for being an “agent” and “identifying
oil business opportunities”.

Ljungberg and Herz left the Brasil Trade
group after the first Sargeant Marine deal in 2010, according to Bruno Luz’s
deposition.

Key actors were referred to by codenames in this secret email that trumpeted Bo Ljungberg's excellent relationship with Vitol

In the USB stick files,
Encom can be seen angling for a range of corrupt
deals. In April 2010, the “Deacon” Jorge Luz, Herz, the Brasil Trade group’s
political point-man Vaccarezza and a lawmaker codenamed V1 met Costa in his
office on the 23rd floor of Petrobras’s brutalist headquarters in Rio de Janeiro.
Herz summarised the meeting in the oxfordgt email account, writing that V1
explained the role of Encom to Costa: V1 “elaborated a business schedule and
projects that could be implemented… and presented Encom and me as the trading
company and the trader, to operationalise the trades.” That same email lauded
the “excellent relationship” between Ljungberg and Vitol, citing Encom’s
interest in “mediating buy and sell operations with the big players”.

According to Herz’s account, Costa
argued in the meeting that the commodity trading corporations already had
direct contracts with Petrobras, so “he could not accept having Encom as an
intermediary”. “Jorge Luz disagrees,” wrote Herz. “He trusts that if we
structure business involving the traders, PRC [Paulo Roberto Costa] will
endorse them.”

‘Keep Vitol warm’

At the April 2010 meeting Herz
proposed several deals Encom could take a cut in. These included bunker
(shipping) fuel; a fuel oil deal with Argentina involving a politically
connected middleman there; Bolivian diesel; and finally oil sales to and from
Brazil.

A March 2010 document in the USB stick headed “Trade Brasil” –
created by Jorge Luz’s secretary, meta-data shows - relates that “V2” (codename
for Vaccarezza, say prosecutors)
requested to see Encom’s accounts each month. His stated ambition was to get no
less than 100 million Brazilian reais ($55m at the time) in “support” from the
company’s deals. The Federal Police analysis reads: “The intention to use the
company Encom Trading for carrying out criminal business remains evident.” Vaccarezza denies being the real V2.

Vitol featured repeatedly in the Brasil Trade emails
discovered on the USB stick.

Of the April
meeting at Costa’s office, Herz wrote: “I took advantage of the occasion to
mention that Vitol, through Mike [Loya – the head of Vitol’s US subsidiary
Vitol Inc.] has no objection to working with us in bunkering fuel, heavy and
light [crude], in brief in all sectors as long as PB [Petrobras] clearly
signals that Encom is the marketing channel... We’ll have to see if we can
structure trade with Vitol”.

One message written in summer 2010 (author
unclear) stated: “We are already identifying some opportunities with Vitol
(fuel oil)”, adding that they were dealing with a named senior Petrobras
official on the matter. Another Carlos Herz message of June 2010, referring to
the Argentinian proposal, said: “We have to keep Vitol warm.”

In its analysis, the Federal Police wrote:
“It was the intention of the GT [email account members, aka Brasil Trade] to
participate in the purchase and sale of petroleum with Petrobras using Encom as
an intermediary. Jorge Luz wanted to get closer to the representatives of
Vitol.”

The next email suggests a meeting between
Ljungberg and Loya was arranged in Houston – where Vitol has its US headquarters
- for Sunday 16th May 2010.

Loya ‘does not recall’

Questioned by Global Witness, Vitol
confirmed that Loya met Ljungberg around that date, saying they were old
colleagues.

Loya “does not recall the details of the
conversation”, a Vitol spokeswoman said. “As head of Vitol Inc, Mr Loya would
not be involved in discussions about potential product deals with Petrobras,”
the spokeswoman continued. “These would be handled by the relevant product
desk.”

Loya, who denies any wrongdoing, told Global Witness of Ljungberg:
“In our dealings, there was never any cause for me to raise concerns.”

A fortnight after the meeting, Bruno Luz sent a
message to the Brasil Trade group concerning the potential Vitol deal: “Fuel
oil: BO [Ljungberg] was tasked with obtaining the minimum value with Vitol and
MA [another Petrobras official] the maximum value with CAB [a senior Petrobras
petroleum trade manager].”

Vitol trades enough oil every day to meet the needs of Britain, France, Germany and Italy

Prosecutors said
this related to the sale of fuel oil by Vitol to Petrobras. Ljungberg would
find out Vitol’s minimum selling price, while the two Petrobras officials would
establish Petrobras’s maximum buying price.

“In possession of such data the GT [or
Brasil Trade] negotiated the commissions that would be distributed between the
members of GT and other beneficiaries (Petrobras civil servants, politicians
etc.),” they wrote.

A Federal Police analysis of Bruno Luz’s
message said it was similar to an email between the Brasil Trade conspirators
about Sargeant Marine from just a month earlier. One member of the group had
written: “We have to move fast to get the maximum price from [another Petrobras
conspirator] and to formulate our offer, trying to also get the maximum
possible commission for Brasil Trade. I already have the minimum price for SM
[Sargeant Marine].”

This suggests the Sargeant Marine deal was a blueprint
for the scheme involving Vitol.

The police haul from Candido Vaccarezza's house also included a selection of luxury timepieces

The potential for bribery and price
manipulation in the proposed Vitol deal was thus extremely high. The two Petrobras officials were listed in the USB
stick files as taking hundreds of thousands of dollars in bribes in the
Sargeant Marine affair and were among those charged in August 2018. Jorge and Bruno Luz corroborated these payments in
testimony, although the Petrobras officials challenge this in their defence
statements.

Vitol said there is no evidence implicating it in bribery. The company carried out due
diligence on Ljungberg and Encom, a spokeswoman said.

“The use of agents
is common in our industry,” she added. “Vitol is not aware of any illegal or
improper behaviour in its dealings with Petrobras. Nor do the documents
provided by Global Witness demonstrate this.”

A lawyer for Dan Sargeant, former president of
Sargeant Marine, said: “We have no comment on these issues.” Sargeant Marine
set up a new asphalt-trading company with Vitol in 2016. Mr Sargeant is its
managing director.

Ljungberg claims innocence… but the Deacon spills the beans

In their police statements, Ljungberg
and Herz denied any criminality, saying they had no knowledge of Encom
receiving funds from the Sargeant Marine deal. They acknowledged jointly owning
Encom and meeting with the Luzes to discuss potential deals, which they said
never materialised.

Ljungberg said he had never used the
oxfordgt account and had only seen Vaccarezza on TV. Herz admitted writing some of the emails
and being present at Petrobras HQ when Vaccarezza lobbied for business. He said
the deals he discussed with Brasil Trade did not go through.

The Luzes chose to collaborate with the police. They
recognised their central role and explained how the bribery scheme worked,
including the Brasil Trade group’s interactions with Petrobras officials and
politicians. The Deacon said that Ljungberg and Herz were part of the Brasil
Trade group and “received [the payment for the Sargeant Marine deal] through
the offshore company Encom Trading SA”. Bruno Luz said Ljungberg did have access
to the oxfordgt account.

Nobody was home when Global Witness visited Vaccarezza's apartment in Sao Paulo

Vaccarezza’s lawyer said he was
“never an intermediary in any type of negotiation between private companies and
Petrobras”, while Vaccarezza himself told police after his August 2017 arrest
that he “did not get a cent from Sargeant Marine” or from the Luzes. He denied
being present at the April 2010 meeting at Petrobras. Vaccarezza was charged with
corruption offences, along with the other members of the Brasil Trade group, in
August 2018.

Paulo Roberto Costa admitted to
police that he received hundreds of thousands of dollars in bribe payments from
the Sargeant Marine deal in a Lombard Odier account in Geneva.

Vitol’s payments to suspected Car Wash money-launderer

The second
intermediary to have received Vitol funds was Nelson Martins Ribeiro, accused
by Brazilian authorities of bribery and being a big-time money-launderer as part
of the Car Wash scandal. He is under investigation by the Car Wash task force
for handling bribe money relating to Odebrecht, Brazil’s engineering and
construction colossus. Four Odebrecht-linked offshore companies regularly paid
three Ribeiro companies registered in the Cayman Islands: Crown International,
Enterprise Tech Industries and Apple Capital Corp.

Ribeiro passed payments on to Paulo Roberto Costa within a few days of the money arriving in his accounts, prosecutors said. You could see it going in and out. Between 2009 and 2012, Costa received some $5.7m in this way.

Judge Sergio Moro - who has presided over most of the Car Wash cases from his base in the southern city of Curitiba - said the evidence indicated that Ribeiro “acted as an intermediary in the payment of bribes between contractors and managers of Petrobras”. Between 2009 and 2012, more than $190m and €4.5m passed through Ribeiro’s accounts, court documents show.

‘Criminal origin’

Ribeiro was jailed
for ten days and banned from leaving Brazil for almost three years, to
prevent flight. His travel ban has been lifted due to the prolonged
inquiry, but he is still under investigation. He has not been charged. Judge Moro, in an interim ruling,
said the evidence “indicates he is a professional money launderer”. (Moro has
now handed over the reins to another judge, after having controversially
accepted the position of justice minister in Bolsonaro’s new government.)

He said: “By using
secret accounts, under the name of offshore [companies], he seems to have
concealed the nature and criminal origin of the assets in order to ensure
impunity for those involved.”

Contacted via WhatsApp, Ribeiro said: “I will defend myself in court… I am sure that everything will be clarified and that my involvement will finally be perceived as non-existent.”

The court documents detailing Ribeiro’s payments also show that from February 2009 to November 2012 a whopping $8.2m paid by Cockett Marine – a marine fuels trader half-owned by Vitol – ended up in two of those Ribeiro offshore companies with accounts in the Cayman Islands: Enterprise Tech Industries and Apple Capital Corp. Some $1.3m of this was paid in 17 instalments after Vitol acquired its stake in Cockett in July 2012.

The Federal Police
stated: “The transfer of resources of a large company that maintains billion
dollar contracts with Petrobras directly to offshore accounts belonging to a
professional money launderer seems strange.”

Vitol confirmed
the payment amounts but said Cockett’s bank statements showed they went to
companies called Madison Corporation and Maclaren Inc, which they said was
associated with Ribeiro. This raises the possibility that Maclaren and Madison
forwarded the money on to the other Ribeiro companies.

Vitol denied any impropriety. A local Cockett
manager merely engaged a company associated with Ribeiro “to obtain local
currency to fund operations”, Vitol said, adding: “Neither Mr Ribeiro nor any
of his associated companies ever acted as an intermediary or representative of
Cockett in respect of generating new business with Petrobras or other clients.”

Vitol says it
undertook due diligence before buying half of Cockett Marine and only became aware of the payments in 2015.A
spokeswoman said: “Vitol understands that a Cockett entity was named in
connection with the Lava Jato [Car Wash] matter in 2015; that Cockett
cooperated fully with Brazilian authorities, that no proceedings for bribery
were brought and the matter is now considered closed. Vitol has a zero
tolerance policy in respect of bribery and corruption.”

Glencore: payments to suspected bribe middlemen

Walking in the footsteps of the ‘King of Oil’

Vitol’s biggest
rival is Glencore, which from its base in the quiet Swiss town of Zug runs a
corporate empire with a $205 billion turnover and a global web of mining and
oil interests. It was founded in 1974 by the “King of Oil” Marc Rich, who is
credited with revolutionising the trade of crude but earned notoriety after US
authorities accused him of sanctions-busting in Iran and fraud. He ended up
fleeing America for a Swiss exile.

Glencore is now
the 11th largest company on the London Stock Exchange but the company is
finding it hard to clean up its reputation.

The US is already investigating Glencore's questionable dealings in the Democratic Republic of Congo

Like Vitol, Glencore also paid middlemen now deeply implicated in the Car Wash scandal. Global Witness has uncovered that Glencore struck a deal with another member of the Brasil Trade syndicate: Luiz Eduardo Andrade, Ledu to his friends.

Glencore also made over 600 payments to a company called Seaview Shipbroking, to broker marine fuel trades. The father-and-son duo running Seaview were behind a highly lucrative system of bribes and insider information to land shipping contracts for other clients, according to a document trail presented by prosecutors.

Ledu: middleman in Glencore oil deal

Luiz Eduardo
Andrade was another one of the ten people featuring in the charge sheet over
the Sargeant Marine affair. Andrade – a former trader under Marc Rich - was
both Sargeant Marine’s Brazilian representative and a member of the Brasil
Trade group. He has been charged with corruption, money-laundering and
belonging to a criminal gang. Andrade had not filed a defence by the time of publication.

Emails from
Andrade speak volumes. They show him tearing his hair out as the Brasil Trade
group tries to corruptly obtain the all-important pricing “formula”. He wrote
that “the key” to getting the formula was with PR (Petrobras’s Paulo Roberto
Costa) and Brasil Trade’s political allies.

His glee at getting the coveted algorithm is
evident in a message of 7th May 2010.
“Good work,” he writes. “Friends, this is a gift from the Gods!!!”

Glencore admitted doing business with ‘Ledu’, whose mugshot features in
this Brazilian police document

Andrade received
payouts from the Sargeant Marine deal, alongside Costa and other Petrobras
officials. The Deacon of Bribes Jorge Luz and his son paid just under $292,000
to Andrade’s accounts in the US and Switzerland, the court records show.
Andrade passed on $168,000 to a senior Petrobras official who helped Sargeant
Marine close its deals.

The court evidence places Andrade at
the heart of the Sargeant Marine deal and its dodgy payments. But Global
Witness was intrigued by passing references in the Brasil Trade messages
regarding Glencore, for example this from December 2010: “Glencore: Subject
brought by Luis [sic] Eduardo,
ex-Glencore and friend of [a named Glencore representative]. Has not been doing
business for 1 year and wants to change interlocutor.”

Contacted by Global Witness, Glencore
said: “Our internal review has identified an agreement with Mr Luis Eduardo
Loureiro Andrade relating to the purchase of a fuel oil cargo from Petrobras
International Finance Co in 2011.” Andrade has not responded to questions.

Given the evidence for Andrade’s
involvement in Brasil Trade’s bribery, Global Witness believes there are
grounds for investigating whether he made corrupt payments relating to the
Glencore fuel oil deal.

Glencore said it “is committed to upholding
good, ethical business practices”.

But, like Vitol, the company did not only
deal with one middleman subsequently fingered by the Brazilian authorities.

Playing battleships

Between 2010 and 2014, Glencore’s
wholly owned subsidiary Ocean Connect Marine made 121 payments totalling net
$2.1m to Konstantinos and Georgios Kotronakis, another father-and-son team who
feature heavily in Car Wash. Konstantinos Kotronakis, then a Greek honorary consul to Brazil, has been under criminal investigation since at least 2017 over a gigantic
bribery scheme involving shipping companies that transported oil for Petrobras.
The Brazilian authorities have not charged him or his son.

Court documents requesting search warrants and temporary arrests detail how this
audacious scheme worked. At its centre was, once again, Petrobras Director of
Supply Paulo Roberto Costa (he of the hollow furniture). The court documents
detail how, in return for hundreds of thousands of dollars, Costa passed
insider information to Konstantinos Kotronakis and son on where Petrobras would
need fuel tankers next. Armed with this knowledge, the five (mostly Greek)
companies could “allocate ships in strategic positions, thus allowing competitive
advantages in the face of other ship owners”, police investigators said. This
kickback was equivalent to about 3% of the contracts, initially split 40% to
Costa, 20% to Konstantinos Kotronakis, and the remainder going to other
parties, Costa admitted in his plea bargain.

Kickbacks from the shipping scheme were allegedly fuelled to the PP political party

The sums at stake
were staggering. Over a five-year period, almost $900m of contracts were signed
between the shipping companies and Petrobras. Between 2009 and 2013, the Greek
shipping firm Tsakos alone entered into $786m worth of contracts with
Petrobras, according to the state oil company’s records. Meanwhile Tsakos and
its agent paid $2.4m to offshore accounts belonging to a pair of companies –
Seaview Shipbroking, controlled by the Kotronakises, and GB Maritime, set up
jointly by Georgios Kotronakis and Costa’s son-in-law, Humberto Mesquita. Those
same companies made regular payments amounting to nearly a million dollars to
Costa’s Swiss and Luxembourg accounts. Costa himself admitted that all or most
of this was expressly for the inside information. The Kotronakises were
involved in the “systematic payments of bribes and
money-laundering”, Brazil’s Car Wash task force concluded in a court
submission.

Court evidence indicates a cut went to the
Progressive Party - a centre-right party - for awarding Costa his position.
Amid the USB stick files are messages between
none other than the Deacon of Bribes and his son, discussing the PP’s
involvement in the deals.

“The kickbacks to
the PP,” the task force wrote, “are even more objectionable [than bribes to
Petrobras officials], as they imply undue interference in the rules of the
democratic game.”

A lawyer for the Kotronakises said that, although Konstantinos Kotronakis is under investigation, "no prosecuting or criminal action has taken place by the Brazilian authorities". Georgios Kotronakis is not under investigation, he added.

In his police
confession Paulo Roberto Costa admitted receiving payment from the Kotronakises
into his Luxembourg account with Swiss bank UBS, for passing on inside
information from 2010 or 2011. Costa’s son-in-law Humberto Mesquita, who helped
manage the payments, gave a similar account to the police, describing how he
and the Kotronakises set up offshore companies and accounts to channel the
payments. Mesquita said he “understood that it was wrong for Paulo to
participate in this”.

Tsakos made no comment.

Prosecutor: bribes were ‘modus operandi’ for Glencore’s ship-broker

The alleged
criminal workings of the Kotronakises thus set out, we come to the $2.1m sent
by Glencore’s subsidiary Ocean Connect Marine to the Kotronakis firm Seaview
Shipbroking. This company was registered in the Marshall Islands in January
2010 - just ten months before the payments began. In February 2011, Georgios
Kotronakis visited the 20th floor of Petrobras’s headquarters, where the guestbook records
that he was representing Ocean Connect Marine.

Glencore told
Global Witness that it had effected more than five times as many trades with
the Kotronakises as the court documents list. The
company said it “entered into around 600 transactions with Petrobras where
Seaview Shipbroking Ltd, an independent marine fuels broking company, were
engaged”. Seaview was on a panel of brokers approved by Petrobras to market the
sale of bunker fuel at Brazilian ports and “assist Petrobras in securing
bunkers for Petrobras’ tanker fleet at ports outside Brazil”.

While Glencore insists that the Kotronakises had
a strong business record, with major companies as clients, their history is
still an enigma. The Baltic Exchange in London – a leading organisation for the
shipping trade - confirmed neither of the Kotronakises, nor their companies,
have ever been members. This is unusual for any shipping company with a UK
registered office, like Seaview.

Their record is
clearer when it comes to iffy payments. Court papers show the Kotronakises paid
well over $1.5m to Costa and other Car Wash players from their UBS Luxembourg
account: Costa himself; another alleged money-launderer
through accounts in Panama and the US; and “criminal” payments to a further
Petrobras manager in charge of ship chartering and contracts. The alleged money-launderer and Petrobras manager are under
investigation, a spokesman for the Car Wash task force said.

Glencore denied
bribery, saying it was not aware the Kotronakises “in fact paid bribes or that
OCM [Ocean Connect Marine] payments were used to fund such bribes (much less if
they were paid)”. Neither Glencore nor its affiliates knew the Kotronakises
“even may have been paying” bribes, a spokesman added.

“Neither your
letters nor the documents you attached present credible evidence that a
Glencore-related entity knowingly made corrupt payments, either directly or
indirectly.”

The ‘Beto Report’ listed a bribe payment allegedly due from Glenclore

But there is more. Soon after Costa’s arrest in March 2014, Federal Police seized a document known as the ‘Beto Report’ in a raid. This had been prepared by Costa’s son-in-law Mesquita so the Petrobras kingpin could keep track of bribes coming in left, right and centre. Under the heading “Trading Glencore”, the amount of $9,973 is listed, with an indication the money would be paid into Costa’s account with UBS in Luxembourg. Costa himself said that “the company Trading Glencore was contracted by Petrobras”, adding he “cannot remember what specific contract this payment was made for, but he is certain it is a bribe”.

Mesquita said in his own plea bargain that the sum related to a shipping contract arranged by Georgios Kotronakis. He said Georgios closed the deal “without Paulo’s help” but decided to pay Costa nevertheless.

Police raided Paulo Roberto Costa's office in this building, in Rio de Janeiro

Prosecutors on the
Car Wash task force said the payment “demonstrates that, in Glencore’s
contracts brokered by Konstantinos Kotronakis and Georgios Kotronakis, the
payment of bribes to Petrobras employees was a modus operandi”.

Reviewing the
evidence on Glencore in the round, the prosecutors added that the “probability
was high” that Ocean Connect Marine’s payments also may have been used, at
least in part, “to corrupt Paulo Roberto Costa and other public officers of the
state-owned company”.

No charges have been brought against Glencore or
any of its representatives in the Car Wash investigation.

Trafigura and the ‘Deacon of Bribes’

Glencore’s rebellious child

In the late 1970s
Claude Dauphin, a French metal trader in his mid-twenties, joined the upstart
company Marc Rich AG – the original incarnation of Glencore - as their country
manager in Bolivia. He quickly rose up the ranks, becoming a top lieutenant,
and sticking by Rich as he fled US court charges in 1983 and ended up on the
FBI’s Most Wanted Fugitives list.

But after power
struggles at the helm of the company Dauphin resigned in 1992, taking others
with him to found Trafigura. Profits were around $30m a year until 2000, but,
like Glencore and Vitol, the Geneva-based company has ballooned since then.
2017 profits were at an eye-watering $2.2 billion.

Car Wash court
documents now also raise questions over Trafigura in Brazil, specifically the
role played by middlemen in Trafigura's relationship with Petrobras.

To justify the
“preventive detention” of the Brasil Trade group middlemen last year, the
Federal Police filed a dossier of their most startling
evidence.
It included documents authored by the Deacon and his son Bruno, updating Paulo
Roberto Costa on negotiations in 2009, where bribery is intrinsic to the deal.

‘Proposal from Trafigura’

The Luzes were
plotting to take a cut of Petrobras’s estimated $36.4m per day petroleum trade,
the evidences shows—and that they were planning a $2 billion oil contract with
Trafigura as a means to do so.

Internal divisions
within Petrobras stymied the deal. But the apparent Luz-Trafigura negotiations
were fairly advanced before they flopped—the Luzes said they had already
submitted their own services’ contract to Trafigura and were desperately trying
to seal the deal.

Luz documents show them scheming to raise $20m in bribes from an 'oil-backed loan'. Trafigura has admitted proposing the loan

The plan was for an “oil-backed loan”, under which Trafigura would lend Petrobras funds to be repaid through a discount on future oil sales, said an insider with knowledge of these events.

“Why should we go to a commodity trading [company] to raise money?” the source said, speaking on condition of anonymity. The proposal from Trafigura risked being “a very expensive transaction from the point of view of Petrobras”. The source’s explanation is consistent with the messages in the court document.

The Luz documents also give a breakdown of how illicit revenues from the loan would be shared, with a cut for the Progressive Party, congressional allies of the Workers’ Party. The sale of 20 million barrels of oil would generate $2 billion, of which 1% would be a “commission”, the Luzes’ euphemistic term for bribes. Of this, $10m was earmarked for the PP and those representing its interests.

But one of the Luzes’ missives –
typically written by Bruno, Jorge not knowing how to use a computer - reveals
that the scheme ran into trouble at a Petrobras board meeting.

“There was a lot of criticism from
the finance department,”
reads the January 2009 brief. “We also learnt the technical wing of the Supply
[Department] is not in favour.”

The Supply Department’s experts gave
a presentation at the meeting that “only points to disadvantages”, wrote the
Luzes, saying: “Our worry is that deadline for approval will be extended and
that the proposal from Trafigura expires.”

“We have already submitted to Trafigura the
contract that will guarantee us,” said the Luz message.

Widening the net

The Luzes said they “strongly
believed” that opposition had come from “Gabrielli himself”, referring to
Sergio Gabrielli, then president of Petrobras. But after the deal fell through,
the Luzes didn’t give up. They said in a later message that they were “working
with Trafigura” on another proposal.

Global Witness
approached Gabrielli at a pro-Lula rally in São Paulo, to be told he could only
discuss these matters “in ten years”.

Global Witness attempted to question former Petrobras president Sergio Gabrielli (centre) at a rally in Sao Paulo

Global Witness sent detailed questions to the Progressive Party but received no reply. The party said in 2017 it has had “no connection with illicit conduct”. When the investigation against Vaccarezza was launched in 2017, the Workers’ Party told the press it “does not have any information about this case.”

Regarding the evidence discussing its proposal for an oil-backed loan, Trafigura said: “Contracts for commodity pre-payments with producers are not uncommon. A proposal for such a transaction was made by Trafigura to Petrobras.”

“But the proposal,” Trafigura said, “did not result in an agreement being negotiated or concluded. Jorge and Bruno Luz are well-known political lobbyists in Brazil. These individuals were not retained by Trafigura in relation to such pre-payment proposal to Petrobras.”

The company noted
that it was “not privy to the exchanges within ‘Brasil Trade’”, and that the
information in the court documents “remains ambiguous commentary and
conjecture”.

Asked whether the
Luzes lobbied on its behalf, and if they were promised a success fee instead of
being “retained”, Trafigura failed to clarify further.

Global Witness submitted several
freedom of information requests to Petrobras for the loan proposal from
Trafigura and the presentation by dissenting Supply Department experts.
Petrobras refused the requests, saying: “It is known to Petrobras that Trafigura
is being investigated by the Federal Police, in a Criminal Inquiry that is
being carried out in secrecy, and it is certain that any provision of data
related to this company may disrupt the investigations in progress.”

Police and prosecutors would neither
confirm nor deny that Trafigura was under investigation. Trafigura also
declined to comment on whether it was under investigation.

Trafigura board member arrested

Although the loan
scheme came to nothing, it is beyond doubt that a former Trafigura board member
– in charge of business development in Brazil and Angola – was a prolific payer
of bribes. Mariano Ferraz
was sentenced to more than ten years in March 2018. He
had paid Costa $868,450 for securing a tanking and docking contract for another
company of which he was director, Decal do Brasil.

Pictured during his interrogation for corruption: former Trafigura executive Mariano Ferraz

Although Ferraz’s bribery conviction did not relate to Trafigura, his arrest was an embarrassing episode for the company, showing criminal behaviour by one of the company’s most senior international figures. His case attracted attention from a parliamentary inquiry into Car Wash. The inquiry noted Ferraz’s importance to the firm, saying he had “risen quickly in the hierarchy of Trafigura by being able to guarantee contracts in Angola”.

When Ferraz was first arrested in 2016, Trafigura said it was “not a party to the contract between Petrobras and Decal do Brasil and does not have a business relationship with Decal do Brasil”.

‘Maturing fruits of a tree’

Asked about the
allegations against Trafigura and Glencore, Deltan Dallagnol, head of the Car
Wash task force, said these “are two lines of investigation that we are still
developing”.

He continued: “We
could compare this to the maturing process of fruits of a tree. Each fruit has
a different moment in which it’s going to mature and be ready to be collected.
And Car Wash is a huge investigation.”

“We are only 20
prosecutors facing more than 450 lawyers who lodge petitions on a daily basis.”

A country's
natural resources revenues should be used in the best interest of its citizens,
and if the giants of world trade are bringing shady intermediaries into their
lucrative crude oil deals, something is going badly wrong.

Global Witness is calling on law enforcement in
the UK, US and Switzerland to launch investigations into the commodity traders’
dealings during the Car Wash scandal, building on the efforts of the Brazilian
authorities. The US investigation announced this year into Glencore has shown
that a light can be shone into even the darkest corners of the international
commodities market. And in Brazil, where the Car Wash scandal has led to
unprecedented political and economic turmoil, clarity over the role of these
little known giants is urgent.

*Since this
report was published Vitol contacted Global Witness to say that it: denied
any alleged dealings with companies in Nigeria identified as corrupt; that its
2011 oil deal with Libya was undertaken with the full knowledge of all relevant
authorities; that a claim against it and others by the PDVSA US Litigation Trust has been
declared unconstitutional by the National Assembly of Venezuela; and a judge in
Florida, in a 5th November
interim ruling, said the trust did not have standing to bring a claim against
Vitol, recommending the case be dismissed.

Global Witness believes there is a clear bribery risk in the cases of all three commodity traders. There is an inherent bribery risk involved when employing middlemen in oil deals; when they appear to have a track-record of bribery, this is even more the case.
Commodity companies have featured in several legal cases and corruption scandals because of their dealings with fixers. The most recent example is a US Department of Justice investigation into Glencore’s use of intermediaries in three countries: the Democratic Republic of Congo, Nigeria and Venezuela. The investigation relates to corruption and money-laundering, Glencore has said.
Global Witness has combed through hundreds of court filings and wrung key admissions from all three commodity companies about their Brazilian dealings. While there is no smoking gun, the evidence that links the commodity firms’ middlemen to bribery, buttressed by the plea agreements from former top Petrobras officials, provide overwhelming reason for authorities to investigate further.
Much of the evidence available to date comes from the side of the middlemen, against whom the Brazilian prosecutors have brought charges. Authorities in the UK, the US and Switzerland should demand the commodity firms disclose what they knew of their fixers’ behavior, and how they managed to secure valuable oil deals in Brazil.
Authorities must therefore investigate whether the middlemen paid or promised bribes to secure business for Glencore, Vitol or Trafigura—and, if so, whether the multinationals were aware.
For each of the commodity houses there are a number of red flags, as detailed in the report. The commodity traders have a choice to do business with middlemen. Multinationals that can readily call upon the expertise of in-country executives and lawyers to conclude oil deals would appear to have no need of the services of intermediaries.